This report discusses the future of the global luxury goods industry, including changes in key markets, the impact of luxury wearables and how brands are looking for more meaningful 'luxury experiences'.

This report discusses the future of the global luxury goods industry, including changes in key markets, the impact of luxury wearables and how brands are looking for more meaningful 'luxury experiences'.

Sales of luxury goods grew by 4% in real terms in 2015, to exceed US$317 billion worldwide, despite facing challenges such as deflation, political instability and fluctuating currencies.

Luxury goods spending, in the context of all retail sales, varies widely across key global luxury markets: in Hong Kong, it is three times as high as in France, and among Western markets, the share of luxury sales is notably higher in Italy than in Germany.

China's luxury goods market was on course to overtake Japan to be world’s second biggest market (after the USA) by 2019 but its slowing growth trajectory means it will remain at number three.

Hong Kong is forecast to be one of the luxury industry’s weakest performing markets to 2020, and a regional power shift in Asia is pushing shoppers and retailers to seek alternative growth hubs and luxury shopping destinations.

By 2020, global sales of wearable electronics are forecast to be higher than luxury watches in value terms, and a trend is emerging where conspicuous consumption is giving way to more meaningful luxury experiences.

3

What we know about luxury brands

Includes video content

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Trends

Best Practice

Warc Best Practice, April 2016

This article provides marketers with information and guidance about luxury brand advertising.

This case study explains how BMW, the car brand, created an art installation at the Dubai World Trade Centre that gave people experience of their new BMW X6, with an optical illusion.

BMW, current market leader in the Middle East Premium car category, focussed on consumers with above average income, and with an interest in tech innovations; OOH is the most important medium in the Middle East, so this insight guided design.

Innovations must be felt first-hand; the key was communicating the feeling of smoothness even over rough roads.

An optical illusion used the X as a visual trigger, creating an image of peaks and slopes over which the prospective customer would be treated to an experience similar to the X6.

The installation gained 30,000 visitors in two weeks; the QR code was scanned 4,541 times, resulting in 830 test drives, and a Facebook video of the installation reached 3,098M with 651,461 views within 6 days.

5

Johnnie Walker Houses

Includes video content

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Design Business Association, Gold, Design Effectiveness Awards, 2016

This case study describes how Diageo established Scotch whisky as part of a sophisticated and luxurious lifestyle in China by creating an embassy for whisky culture: The Johnnie Walker House.

This case study describes how Diageo established Scotch whisky as part of a sophisticated and luxurious lifestyle in China by creating an embassy for whisky culture: The Johnnie Walker House.

The key problem was that whisky was not seen as a luxury beverage in China in comparison with the more established drinks of Cognac and Baijiu.

LOVE created an unprecedented ultra-VIP luxury brand experience space for Johnnie Walker in Shanghai that included layered narratives, art installations and interactive experiences.

The result was the establishment of 10 other Johnnie Walker Houses – including one in Beijing – increased brand awareness from 74% in Q1 2013 to 97% in Q1 2015 and a year-on-year footfall increase of 20%.

6

Audi TT: Brochure Hack

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MMA Smarties, Gold, 2015

This case study shows how Audi, a car manufacturer, created a direct mailing that used Bluetooth technology to create a mobile experience for its new Audi TT model.

Although various types of price promotion are used to increase sales, they negatively may affect consumers' perceptions of a premium-product brand. View Summary

Although various types of price promotion are used to increase sales, they negatively may affect consumers' perceptions of a premium-product brand. The authors of this study believe their work advances the limited research in this area by distinguishing between direct- versus indirect-price reduction and marketers' use of a "precondition"—i.e., promotions offering free gifts, trade-in incentives, or loyalty-program benefits. Results of this two-part study, which combined sales data of German premium automobile brands with consumer-behavior analysis, showed that direct-price reduction had the strongest positive sales impact. Brand perception was least deteriorated by both direct-price reduction without a precondition—and indirect-price reduction with a precondition.

8

The Brand Challenge: Luxury branding

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Jean-Noël Kapferer, Research on Warc, September 2015

This extract from the book 'The Brand Challenger' discusses luxury marketing, and puts forward five 'anti-laws', where the usual rules of marketing do not apply to luxury brands.

This case study demonstrates how a new design transformed Johnnie Walker Collection, a set of four miniature JW whisky bottles, into a highly desirable gift pack.

The total Scotch whisky market decreased by 0.8% in 2013 compared to 2012 and JW wanted to create increased desire for its JW Collection.

A redesign of the packaging aimed to make the product more premium in appearance and address issues with the previous design such as an overlapping front flap which took up unnecessary space when displayed on the shelf.

This case study demonstrates how unique design allowed boutique English perfume house Penhaligon's to achieve a sales increase of 23%.

In 2013, sales in the prestige fragrance category were flat and during the crucial Christmas season, luxury brands faced relentless pressure from price sensitivity, online shopping and new entrants to the market.

Penhaligon's Victorian heritage provided the basis for the design of the brand's 2013 Christmas collection, a music box that took the form of an ornate birdcage filled with mechanical songbirds.

The intricate design of Penhaligon's Christmas boxes saw sales increase by 23% in a flat market faced with price sensitivity.

12

Fortnum & Mason Teas packaging

Includes video content

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Trends

Best Practice

Design Business Association, Gold, Design Effectiveness Awards, 2015

This case study describes how Fortnum & Mason, a long-running specialist premium food store in London, invested in a redesign that would dramatically increase sales of its tea ranges.

This case study describes how Fortnum & Mason, a long-running specialist premium food store in London, invested in a redesign that would dramatically increase sales of its tea ranges.

Teas are the hero range for Fortnum & Mason and with main competitor Harrods benefitting from its strong position as a tourist attraction, Fortnum & Mason needed to reinforce their authority in premium specialty tea.

The entire range of specialty teas was redesigned using fully printed, colour-coded tins to create distinctiveness and reflect the brand's renowned attention to detail and quintessential Englishness.

The redesign stimulated an average overall 103% increase in total like-for-like range volume sales.

13

New models for luxury marketing

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Best Practice

Marcia Roosevelt, Admap, February 2015, pp. 18-20

This article urges a rethink of luxury marketing, as western societies change and make mass-marketing less relevant, while other countries have different approaches to hierarchy.

This article urges a rethink of luxury marketing, as western societies change and make mass-marketing less relevant, while other countries have different approaches to hierarchy.

Luxury marketing is often dismissed and perceived as niche and irrelevant, but this is changing as technology makes culture more individualised and companies want to expand their top-tiers for greater profitability.

Research found that national and cultural values are more important than economic indicators in determining what 'luxury' means.

This led to four distinct models of 'luxury': the power of prestige, democratised performance, graceful utility, and refined beauty aesthete.

This case study describes how Audi, the car manufacturer, promoted its Audi A3 Sportback car model by targeting young males (25-39 years) through different messages in different channels to increase sales in France, Italy and Germany.

This case study describes how Audi, the car manufacturer, promoted its Audi A3 Sportback car model by targeting young males (25-39 years) through different messages in different channels to increase sales in France, Italy and Germany.

This audience have busy, successful and aspirational lives so the A3 Sportback was positioned as being at the centre of everyday life.

This 'fast forward' generation enjoy a fast pace, so Audi adopted this tone to talk about the innovative features in the new model.

This event report discusses and questions several myths about luxury shoppers in China. Some of the main misapprehensions include: they just want to accumulate more possessions (in fact, product quali...

This event report discusses and questions several myths about luxury shoppers in China. Some of the main misapprehensions include: they just want to accumulate more possessions (in fact, product quality is a priority); they can effectively be told what to buy (in reality, they are evermore educated and discriminating); they always look at the logo first (standing out is increasingly important); they are purchasing high-end goods online (the in-store experience is still highly valued); they like direct mail (mobile tools like WeChat are the preferred option); and they enjoy flaunting their wealth (sharing news about luxury purchases now typically occurs in private, one-to-one forums, such as via Skype).

18

Mercedes A Class: #YouDrive

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David Edwards, Warc Prize for Social Strategy, Gold and Special Award for Channel Strategy, 2014

This case study describes how Mercedes-Benz monetised social engagement when real and virtual worlds converged in 'YouDrive'; the world's first interactive driving experience conducted through a television commercial in the UK.

This case study describes how Mercedes-Benz monetised social engagement when real and virtual worlds converged in 'YouDrive'; the world's first interactive driving experience conducted through a television commercial in the UK.

Low consideration for the Mercedes-Benz brand amongst drivers aged 25-44 years old presented a significant marketing challenge when faced with the launch of the new A-Class.

Tapping into the convergence between social platforms and broadcast content, the driving experience allowed a television audience to influence an advertisement in real time via a digital social platform.

The result was unprecedented levels of real-time social interaction, consideration and sales in the UK, and YouDrive achieved a return on marketing expenditure of over 9-to-1.

19

Croots rebrand

Includes video content

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Trends

Best Practice

Design Business Association, Gold, Design Effectiveness Awards 2014

This case study describes how a new brand, Croots, was created for AC Supplies, a English maker of canvas and leather bags and accessories.

This case study describes how a new brand, Croots, was created for AC Supplies, a English maker of canvas and leather bags and accessories.

The brand identity needed to represent English provenance, craftsmanship, quality and value for money and its design was inspired by marquetry found on shotgun barrels.

The launch of the new Croots brand was supported by a new product brochure, website for both consumers and trade, branded products and additional point of sale.

The Croots brand has led to a 35% increase in sales, outperforming the market by 686%.

20

Luxury brand marketing: The art of luxury

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Paul Simonet and Carlos Virgile, Admap, November 2013, pp. 20-23

This article compares luxury brands with art, arguing that both avoid rational justifications for their existence. View Summary

This article compares luxury brands with art, arguing that both avoid rational justifications for their existence. Despite the key difference of luxury brands being commercial and necessarily limiting supply, lessons can be taken from the appeal of art. Inspiration, individuality, skilled production, level of difficulty and uniqueness are common to art and luxury brands. A number of luxury brands are discussed in this context, including Cartier, Burberry, Chanel and Hermés.

21

Luxury brand marketing: Making a luxury brand

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Nir Wegrzyn, Admap, November 2013, pp. 24-26

This article discusses the nature of desire and how this relates to luxury brands. People engage with brands to help them engage with the world: to reflect experiences and frame how they want to be perceived. View Summary

This article discusses the nature of desire and how this relates to luxury brands. People engage with brands to help them engage with the world: to reflect experiences and frame how they want to be perceived. Luxury brands embody aspirations and desires, and as such cannot be everyday. The article describes key components that create a luxury brand, including price, differentiation, waiting lists, framing and irrationality. It is argued that despite the change in public discourse due to economic difficulties, the desire for luxury brands will continue.

This article discusses the importance of integrating digital strategies into luxury brand marketing, allowing for more creative brand story-telling. Such brands have traditionally used high quality print ads and many have translated these into digital formats successfully. Digital strategies are vital for luxury brands as their target groups are higher-than-average users of digital media. Online video has become particularly popular with luxury brands as a way of expressing their stories and identities. This development reflects the desire of consumers to seek understanding of brands in order to select ones which express their values. Luxury brands are well placed to use their rich histories to create credible online content.

This paper investigates the meaning of sustainable luxury among the wealthy, who are the primary target group of luxury brands. View Summary

This paper investigates the meaning of sustainable luxury among the wealthy, who are the primary target group of luxury brands. In doing so, it highlights the interest of using a combination of semiotics tools (Peirce's and Greimas' paradigms) to analyse consumers' discourses. Indeed, understanding the sign-value of a brand in relation to the natural environment and society is paramount to the development of CSR activities, in order to avoid, on one side, being perceived as greenwashing and, on the other, losing the brand meaning and authenticity. Findings indicate that the luxury clientele opposes 'ascribed luxury' (discreet and emphasising traditional manufacturing techniques) to 'achieved luxury' (conspicuous and marketed). The contribution of luxury brands to society welfare should be located on a continuum between sustainability in ethos and along the supply chain, and pure philanthropic actions, both being worthy in consumers' views, and both being expected from luxury brands to different degrees, depending on the brand ascribed or achieved status.

This best practice paper outlines five tactics that marketers of alcoholic drinks can employ to differentiate themselves in market and achieve a premium price positioning. View Summary

This best practice paper outlines five tactics that marketers of alcoholic drinks can employ to differentiate themselves in market and achieve a premium price positioning. These include the use of: trendy ingredients; celebrity endorsement; engagement via events and social media; stylish packaging; and exclusivity.